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China PP price uptrend intact after holidays despite local supply pressure

by Pınar Polat -
  • 02/02/2023 (12:30)
(Correction in China’s domestic inventory levels in the second paragraph to 860,00 tons from 930,000 tons)

In the run-up to the Lunar New Year holidays, import PP markets in China reached their highest levels in the past six months on average based on ChemOrbis data. Moreover, spot local prices have managed to extend their gains post-holiday despite growing supply pressure at home and weaker Dalian futures prices.

Supply at home rises but limitations from overseas sellers remain

The biggest change from the pre-holiday period has been the rising supply pressure at home, undeniably. An accumulation of stocks during the holiday period is traditionally expected, and it did happen. According to market sources, the two major local producers’ combined PP and PE supply was standing at 860,000 tons as of February 1st Wednesday, which is around 104% higher than the pre-holiday levels.

Apart from this, there is also a shadow from the expected PP start-ups in the first quarter which are around 4.5 million tons/year.

Still, supply limitations from overseas markets, particularly the Middle East amid the scheduled maintenance season of the region have kept prices on an uptrend along with China’s expanded economic activity owing to the nation’s full reopening.

As a few traders put it, “There has been no solid demand recovery yet as players are still not fully back on the market. The latest inventory level at home has increased compared to before the holidays, and Dalian futures prices have mostly moved lower. Yet, spot PP offers have increased after the holidays due to the government’s favorable policies and low supply from the overseas markets.”

Middle East plants under maintenance

As ChemOrbis Production Pro shows, the Middle East has been undergoing a maintenance season.
Saudi Yansab and Emirati Borouge’s PP plants remain offline after going offline in mid-January, cutting around 1.2 million tons of capacity.

Going forward, OQ is also expected to take its PP units offline in February for a month. They indicate a total capacity of around 1 million tons of PP.

Like PP, PE supply from the region to China has also been facing limitations, meanwhile.

A closer look at latest price levels

Initial homo-PP raffia and injection price levels for the current week have been reported at $940-970/ton CIF for the Middle East origin offers while those of Indian origins have been reported at $940-950/ton CIF. When compared to pre-holiday levels, the weekly ranges have been $10/ton higher.

Local homo PP raffia and injection prices were assessed at CNY8000-8050/ton ex-warehouse China, cash including VAT ($1044-1051/ton without VAT), up by CNY200-250/ton ($30-37/ton) from pre-holiday.

As for PPBC injection, price levels for the current week have been reported at $960-980/ton CIF for the Middle East origin offers, again up by $5-10/ton from pre-holiday.
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